Global aerospace and security company Northrop Grumman has completed a triple tranche US$1.5bn senior unsecured bond issue as it seeks to repay its existing debt. The company offered US$500m of 1.85% senior notes due November 2015, US$700m of 3.5% senior…
Global aerospace and security company Northrop Grumman has completed a triple tranche US$1.5bn senior unsecured bond issue as it seeks to repay its existing debt. The company offered US$500m of 1.85% senior notes due November 2015, US$700m of 3.5% senior notes due March 2021 and US$300m of 5.05% senior notes due November 2040. Interest will be paid semi-annually in November and March. The notes were issued via holding company Northrop Grumman Corporation (NGC) so the debt will be subordinated to operating subsidiary debt because there are no upstream guarantees. Citigroup, JP Morgan and RBS were lead underwriters and bookrunners on the issue, with Credit Suisse, Deutsche Bank and Wells Fargo joint bookrunners and underwriters. BNP Paribas, Mitsubishi UFJ and SunTrust Robinson Humphrey were senior co-managers and underwriters while Banca IMI, Goldman Sachs and Morgan Stanley were co-managers and underwriters. Sheppard, Mullin, Richter & Hampton LLP provided legal advice on the issue. Northrop stated that proceeds from the offering would predominantly be used to repay debt, as well as for pension plan funding (the company has so far made US$390m in pension contributions for the first nine months of 2010), acquisitions, share repurchases and working capital. Northrop said that it plans to repay at maturity subsidiary Northrop Grumman Systems Corp’s (NGSC) US$750m outstanding of 7.125% notes due 15 February 2011. It also launched cash tender offers for any and all of the aggregate US$1.919bn of NGSC’s existing notes, comprising US$300m 7.75% notes due 2016, US$300m 7.875% notes due 2026, US$300m 7.75% notes due 2026, US$168.8m 7.75% notes due 2029, US$750m 7.75% notes due 2031 and US$100m 6.98% notes due 2036. Deutsche Bank, Goldman Sachs and JP Morgan are lead dealer managers and BNP Paribas, Citigroup, RBS and Wells Fargo co-dealer managers for the tender offers. The tender offers expired 8 November with around US$681.8m of the US$1.919bn notes outstanding validly tendered. Northrop stated that it expects to record a one-time, pre-tax charge of approximately US$230m to “other income (expense)” in Q4 2010, principally related to the premiums paid to tendering holders of the notes. Northrop is evaluating strategic alternatives for its shipbuilding business, which could possibly lead to a sale or spin-off. The company has increasingly focussed on its core NGSC business with the US government accounting for approximately 92% of the company’s 2009 revenues. At the end of last year, Northrop merged its Northrop Grumman Space & Mission Systems Corporation into NGSC.
